Politicians continue to demonstrate a fierce desire to be seen to be doing something – anything! – about excessive executive pay and corporate tax avoidance. Nick Clegg, UK deputy prime minister, used a BBC radio interview on Thursday to step up the verbal assault on such practices. He said:
Look at this debate about irresponsible capitalism, what I call crony capitalism. It’s Liberal Democrats [Clegg's party] who’ve led the debate on clamping down on bankers’ bonuses and we must be just as tough this year in the bonus season that’s coming up as we were last year, if not more so.
It’s for him and his colleagues to prove that these threats can be turned into effective action, but in the meantime I’m struck by his terminology. What Mr Clegg calls “crony capitalism” is not what most of us call crony capitalism. I have always assumed the term applies quite specifically to unsavoury, over-cosy relationships between businesspeople and politicians.
That is certainly how it is used in parts of Asia, where cosiness often turns into outright corruption, and in the US, where some commentators have accused Barack Obama of getting too close to big business. See, for instance, this Fox News opinion piece accusing the president of funnelling clean energy subsidies to business allies.
Mr Clegg isn’t alone in applying it more broadly. Conservative member of parliament Jesse Norman justified its application to all recent business excesses in a paper published in December and in an FT comment piece. Defining crony capitalism (and in the process attempting to distance the Conservatives from its worst abuses) he wrote:
Crony capitalism arises when economic activity escapes the constraints of law, markets and culture. It is marked by the clash of business activity and the wider public interest, and the separation of business merit from business reward. Value creation is replaced by rent seeking and certain groups become enormously wealthy without taking risk. These factors lead to long-term economic underperformance, and sometimes to social unrest.
It doesn’t matter too much if the term is extended in this way – provided those politicians who crusade against crony capitalism recognise the implications for their own kind. To wage war against “crony capitalism” means also taking the fight to the politicians who colluded in its spread.
